OPERATIONS

DIGITAL PROCUREMENT
FROM MYTH, TO UNLEASHING THE FULL POTENTIAL
CONTENTS

00 04
INTRODUCTION CAPITALIZE ON
P. 02 NEW SOURCING
P. 18

02 06
USE BIG DATA ROBOTIZE
AND ANALYTICS SOURCING
TO MAXIMIZE THE TASKS
PROCUREMENT P. 28
LEVER
P. 10

01 05
CAPITALIZE DIGITIZE
ON NEW COST PROCUREMENT
PERFORMANCE PROCESSES AND
LEVERS COLLABORATION
P. 04 P. 22

03 07
USE BLOCKCHAIN DESIGN A DIGITAL
TO SECURE THE PROCUREMENT
SUPPLY CHAIN TRANSFORMATION
P. 14 PLAN
P. 34

1
INTRODUCTION
We are in the midst of a digital revolution. By 2030,
an estimated 60 percent of the world’s population will access
the internet exclusively via mobile devices, with the number
of such devices expected to reach more than six per person
on average. Over 90 percent of all data now available was
generated in the past two years, and this number is expected
to double every two years.
Each day, large globalized corporations – many of them
historically leaders and players in their markets – are
confronted with new challenges: new competition, new
business models, value migration, intermediation, and
disintermediation. The relatively stable competitive
environment of the 2000s is a thing of the past, and threats
– some with irreversible consequences – loom from every
side. Who can forget the emblematic examples of market
leaders missing the digital transformation? Borders, once a
US bookstore leader, driven into bankruptcy in 2011; Kodak,
defunct in 2012; Blockbuster, the American videocassette
rental leader, vanishing in 2014.
We are witnessing a new wave of digital disruption: The
appearance of Uber has led to 30 percent to 40 percent
decreases in taxi revenues in certain countries; the projected
market capitalization of Airbnb is as much as the largest public
hotel company worldwide (and almost twice the second).
These are just two examples of a widely documented trend.
Adapting business models is a matter of survival for large
corporations. There is no shortage of success stories:
large banking companies going into online banking;
the development of Industry 4.0; multichannel retail
distribution; Uberization, and more.
Purchasing, specifically, is challenged to capitalize on
these transformations, which represent the opportunity
to cross the next frontier of cost optimization and achieve
previously unheard-of cost savings. There moreover exist
greater efficiencies to be gained in how the procurement
function operates: Digitally enabled collaboration with
internal stakeholders and suppliers, automated/robotized
processes and activities, partnership with startups...
2
Eight major trends underly these
profound transformations:
DIGITAL CLIENT RELATIONSHIP
E-commerce and online banking on the one
hand, digital marketing and social networks on
the other, are transforming cost structures and
creating performance opportunities that must
be captured by procurement.
NEW ECONOMIC MODELS
The advent of new models (Uberization,
Sharing Economy, “As a Service”, and Cloud)
among suppliers offers attractive pockets of
competitiveness, thanks to new economic
rationales, but may also give rise to greater
dependency and more complex negotiation
situations, as well as data property and
security issues.
DATA MANAGEMENT
The masses of data available inside and outside
the organization, and machine-learning
algorithms, can be used to maximize the
amplitude of procurement leverage, but also
represent regulatory challenges (GDPR).
BLOCKCHAIN
Blockchain may be used to secure sourcing
and sourcing channels, contracts, and payments,
as well as analyze market trends on a large scale.
ROBOTICS AND ARTIFICIAL INTELLIGENCE
The advent of robotics (RPA, collaborative
robots, autonomous vehicles, etc.) will have a
sustainable impact on the cost of work and is
opening up new performance opportunities.
CONNECTED OBJECTS
The Internet of Things is bursting onto
the scene in traditional industries and
revolutionizing direct costs, maintenance
purchases, and investment plans through
digital asset management.
3D PRINTING
Production costs, sourcing channels,
and procurement of small batch, spare
parts, and prototypes will likely be
completely reconfigured.
DRONES
Last mile logistics costs and preventative
maintenance costs for hard-to-access
infrastructures may henceforth be optimized.
These trends have a significant impact on the way companies operate. Given the new
challenges and concepts, how should procurement be used to capitalize concretely
on digital transformation and how should the procurement system be migrated?

THE WHAT THE HOW

Capitalize on new cost

How to develop a strong
performance levers
digital vision and culture
•• Accelerate digital adoption by within the procurement
business lines and anticipate community? How to ensure
future evolutions to stay that procurement effectively
a step ahead. manages resulting constraints
•• Challenge traditional suppliers and implications?
on their digital capabilities, and
integrate digital pure players
into panels.

How to execute initiatives

around the CPO/CDO/
Capitalize on technology to CIO triangle?
maximize procurement levers
•• Use big data to challenge CAPITALIZE
demand and suppliers ON DIGITAL
more effectively. TRANSFORMATION
•• Utilize blockchain to THROUGH
secure transactions. PROCUREMENT
How to identify, attract,
•• Take advantage of new develop, and retain
economic models. talent to implement
transformation successfully?

Optimize efficiency
of procurement
•• Dematerialize processes How to ensure agile resource
and collaboration. allocation and engage
prescribers and suppliers?
•• Robotize sourcing activities.

Copyright © 2017 Oliver Wyman 3

 Digital transformations driven
by technological breakthroughs
are opening up new performance
perspectives for company
business lines and external
suppliers. To make the most of
these disruptions, purchasing
faces three main challenges:
•• Help business lines integrate
new opportunities into their
operations and take full
advantage of the resulting
performance improvements.

01 •• Challenge historical
suppliers on their digital
maturity and on their ability
CAPITALIZE to deliver performance
ON NEW COST levels unattainable through
traditional operating models.
PERFORMANCE
•• Integrate digital pure
LEVERS players into the company’s
supplier ecosystem.
4
Exhibit 1: THE NUMBER OF BANK BRANCHES IS DECLINING IN DEVELOPED COUNTRIES (2011–2016)

CANADA
2.7% NETHERLANDS1

-33.5%
UK2
-9.0% GERMANY1
-9.6%

FRANCE1
ITALY1 JAPAN
-2.3% 0.5%
US -9.2%
-6.8% SPAIN1
-22.5%

AUSTRALIA
-4.1%

1* 2015 data; 2* 2014 data

Source: SNL, U.S. Census Bureau, ECB, Tradingeconomics, UBS

What steps can procurement Digital client relationship

take in supporting the
digitization of businesses to
maximize cost performance?
Procurement directors face a difficult
equation: In high-performing organizations,
many of the more obvious – and easy – savings
opportunities have already been tackled.
Yet the challenge to find greater performance
levers and increase overall savings is never-
ending. For most advanced companies, having
ADVANCED
E-commerce, online banking, digital
marketing, connected objects, robotics,
ROBOTICS
IN HOSPITALITY
artificial intelligence, 3D printing, and drones: THE HENN-NA
The digital world and its host of innovative HOTEL.
JAPAN 2016
technologies offer businesses unprecedented
opportunities to rethink their practices and
operate with completely new cost structures
that are more attractive than previous models.
Retail distributors and banks, for instance,
are reducing their branch footprints in favor

90%
mastered demand management levers, there
of e-commerce and online banking. Walmart,
is seemingly little improvement that can be
the American retail giant, closed 269 stores
made in the short term. of all tasks
in 2016, including 154 in the United States;
and activities
HSBC closed 321 branches in 2015 and 2016, robotized
In an era of digital transformation, many
27 percent of its network.
more opportunities for savings exist. Indeed,
we could provide an almost endless list,
Conversely, e-commerce pure players are
if needed. Briefly, here are some examples
getting into physical distribution. A striking
that we find particularly compelling.

Copyright © 2017 Oliver Wyman 5

Exhibit 2: NEXT FRONTIER OF PROCUREMENT PERFORMANCE THANKS TO DIGITAL
CROSSING THE NEXT FRONTIER ...REQUIRES MAKING THE MOST OF ALL DIGITAL TRENDS
OF PERFORMANCE...
Integrate “Digital” pure players in the supplier ecosystem.
Intensify relationships with, and support development of highly innovative startups.
FOSTER
INNOVATION Help business lines accelerate innovation scouting, proof of concepts,
and agile partnerships.

MITIGATE Leverage big data to perform “Third Party Risk Management”.

RISK Use weak signals analysis and predictive analytics to anticipate risk mitigation.

100%
Reduce “Bricks and Leverage connected objects
SPEND Mortar” presence to the and associated data to reduce
80% LESS profit of digital presence. unnecessary activities.
Leverage
Use robots, data for
60% Use new
Reduce costs

Take advantage demand

drones, economic models
of 3D printing management.
BUY and artificial (Uberization,
to shorten supply
40% BETTER intelligence sharing economy...)
chains and reduce
to replace as competitive
manufacturing costs.
human labor. sourcing
20% alternatives for
traditional goods
BUY Leverage big data to gain and services
0% CHEAPER advantage in vendor negotiations. purchased.
LOW HIGH
MATURITY
Source: Oliver Wyman analysis

example is Amazon’s Amazon Go concept store,
opened in Seattle in 2016, which foregoes cash
registers and cashiers. Amazon Go is supported
by an impressive combination of technologies
that leverage mobility, the digital and social
consumer ecosystem, connected objects,
captors, radio‑frequency identification (RFID),
and big data with machine‑learning algorithms.
Robots, drones, and
artificial intelligence
The use of robots is also moving forward in the
service sector. For example, the Pepper robot
developed jointly with startup Aldebaran,
performs hospitality functions in European
stations. Pepper can detect the presence
of travelers in a station, welcome them,
assist them in finding information about
their journey, gather data concerning their
satisfaction, and more. In the hotel sector,
a striking example of robotics utilization is
Japan’s Henn-na Hotel, where 90 percent
of personnel functions have been robotized.

Robots are replacing human labor,
performing tasks once considered beyond
their capabilities, including customer‑facing
functions. These trends are particularly
prevalent in industry (collaborative robots)
and logistics (AGV – “auto-guided vehicles”,
such as autonomous handling equipment),
as well as shipping (self-driving trucks).
Drones are revolutionizing the surveillance of
infrastructures that are difficult or hazardous
to access. An example of this is in the
telecommunications and electrical industries
where teams currently must be on site
simply to make observations and, if they are
necessary, transport resources by helicopter
(a very costly proposition).

6
 PREVENTATIVE MAINTENANCE AND INTERNET OF THINGS
EXAMPLES OF INDUCED BENEFITS

$71 million saved $1 million saved 36% fewer

on road network maintenance
costs in Cambridge, Canada,
after a predictive maintenance
policy was established to inspect
roads only when necessary.
by a construction equipment
manufacturer in just two weeks using
preventative maintenance to identify
problems and take preventative
measures before problems occurred
(reducing downtime and repair costs).
service calls by customers
of a water utility, following
the establishment of a
preventative maintenance
policy and automated water
meter reading.

Connected objects For procurement directors, the game

The Internet of Things (IoT) offers numerous
opportunities yet to be unexplored.
For example, the growing capabilities of
mechanical equipment to self-detect defects
and send out relevant notifications allows
maintenance resources to be mobilized on an
as-needed basis. These resources can then be
reallocated to higher‑yield initiatives. Notably,
BP, the oil and gas giant, has engaged with
such technologies.
A great many applications have also been
developed to save energy in commercial
buildings (most notably by AT&T), as well
as in industrial processes and infrastructures.
3D printing
In the fields of maintenance, engineering,
and construction, 3D printing radically
reduces the cost of prototyping (Ford),
spare parts (Daimler, Airbus, and GE), and
even raw materials (in many construction
companies). Traditional logistical models may
well be disrupted by the ability to manufacture
products on demand and closer to usage sites,
thereby reducing storage needs.
is on: Performance improvement can A LEADING
be supported through a variety of novel FRENCH BANK
means, and these must be harnessed. CREATED A
START-UP
ACCELERATOR
Much of this is still at an experimental stage. TO SUPPORT
And, certainly, challenges remain and questions
need to be answered as we move forward into
the era of digital transformation. For example,
internal stakeholders in business lines may
be unwilling to take on new risks that affect
existing business. Buyers, unfamiliar with
current innovations, may not be incentivized to
scout out advances and build partnerships with
innovative startups; they may fail to challenge
300
start-ups in
historical suppliers as to their digital capabilities.
seven different
villages
Procurement may also find adoption of
new emerging technologies difficult,
especially where their cost-effectiveness
and overall positive influence has not been
well established. Finally, new suppliers and
providers may have scant track records and
thus pose significant risks in partnerships.
How can procurement position itself
as a key partner to business in fostering
and accelerating digital transformation,
and in capturing cost benefits?

These examples are but a few of the seemingly To effectively support business lines in
infinite number of new opportunities to reduce transforming for the digital age, procurement
costs and improve performance. must be active on a number of fronts:

Copyright © 2017 Oliver Wyman 7

Exhibit 3: 3D PRINTING MARKET
$ BB (2016) 4.6
3.9

2.3

1.0 0.9
0.4

Automotive Aerospace Tools and Architectural Home Other

design and defense component printing design printing

Source: IDC’s 3D Printing Spending Guide (2017)

•• IDENTIFY AND COMMUNICATE A FULL

CASE STUDY RANGE OF NEW OPPORTUNITIES TO
BUSINESS LINES by engaging in constant
technological and market intelligence and
A FULLY DIGITAL TEMP AGENCY: closely collaborating with prescribers.
SHAKING THINGS UP IN
A SLEEPY INDUSTRY •• QUANTIFY AND QUALIFY OPPORTUNITIES
in terms of performance objectives,
The young French startup QAPA, founded in 2011, has just complexity of execution, risks, and
raised a fresh funds of €11 M to accelerate the development supplier targeting.
of its fully digital temp agency.
•• PROVIDE AGILE SUPPORT TO BUSINESS
The temp market in France has traditionally been
LINES BY ENABLING MULTIPLICATION OF
dominated by three major players, which have captured
about 60 percent of a market estimated at €25 billion. In
PROOF OF CONCEPTS, and communicate
this configuration, industry leaders are unlikely to initiate successes to institutionalize the integration
an innovative approach, disruptive to their market and of new opportunities into technical
enabling clients to optimize costs. Professional buyers purchasing strategies.
know this: Margins are low and profitability is tied to
volume, which strengthens the position of historical •• CONFORM TO BUSINESS LINE PROJECTS:
leaders relative to newcomers. Many discussions are initiated directly
by business lines with innovative digital
The arrival of QAPA in the industry with the promise of a
suppliers, and procurement must avoid
“commission half that of traditional temp agencies1” could
reshuffle the deck and pave the way for fresh competition,
adding complexity to nascent processes.
tipping the competitive balance in favor of big clients. The objective should be to adopt the
simplest, most flexible, and most agile
This typical example shows that procurement must processes conducive to innovation
be able to identify newcomers (offering robustness,
integration. Traditional processes should
technical and economic relevance, and sustainability)
who are likely to create new performance opportunities, not be imposed on existing relationships.
support them in their development (co-development, Procurement should also to take the lead
proof of concept, participation in financing), and on some emblematic projects.
challenge historical players to shift their economic
models. They must do this in order to capture some
•• IDENTIFY INNOVATIVE NEWCOMERS:
of the benefits of digitization from these suppliers, who Purchasing must monitor and, in some
will continue to represent a significant share of spending cases, even support the development of
for the foreseeable future.1 new firms to capture valuable innovations.
The task is particularly complex, given the
1 Source: QAPA multitude of pure digital players and their
rapid trajectories (toward success as well

8
Exhibit 4: RISING 3D PRINTING SPEND BY 2020
$ BB 28.9
CAGR
2016–2020
+22.3
13.2
2016 2020
Source: IDC’s 3D Printing Spending Guide (2017)
as failure). This complexity is only amplified
for companies operating on a global scale.
Some purchasing departments have
established a “100 startups” watch list;
others have set up arms for in-house capital
funding and knowledge-sharing tools.
•• STREAMLINE PROCESSES FOR RELATIONS
WITH PURE PLAYERS: Here again, the
objective is to establish simple, flexible,
iterative processes specific to discovery
environments. Companies must identify
and target the objectives typical of this new
kind of relationship, such as development
funding, intellectual property, and payment
terms. Simultaneously, they must avoid
cumbersome RFI/RFP processes or risk
driving innovative newcomers toward
more agile competitors. All relationships
with startups and any valuable idea they
might develop should be aggregated and
shared across the company to ensure the
broadest access to innovation and foster
intellectual cross-fertilization.
•• STIMULATE HISTORICAL SUPPLIERS:
Encourage suppliers to develop their
digital capabilities and enhance their
competitiveness. This is will be particularly
challenging, as historical players rarely
initiate digital transformations unless
forced to do so by industry newcomers.
Copyright © 2017 Oliver Wyman
CASE STUDY
NEW DIGITAL PLAYERS
CHALLENGES FOR BUYERS
Many services delivered by pure digital players depend
on “As-a-Service” offerings with cloud-based infrastructure.
This is particularly true for IT services and solutions, and
will not fail to create new challenges for buyers:
New price models: Usage-based pricing is becoming
commonplace, with a wide variety of corresponding metrics
(such as by user, by transaction, by usage time, by data
volume). The notion of total cost of ownership (TCO) is
changing profoundly and may be much more complex to
evaluate because it is directly dependent on usage demand,
something that is often difficult to predict. Moreover, the
risks of “shadow procurement” are rising as prescribers
can buy new on-demand services outside of all control.
Data property and protection: Company data is stored
and managed by third parties outside the organization.
In this context, the question of data ownership becomes
central. In many supplier business models, this factor is part
of the equation, because it creates value. Buyers must thus
be careful to ensure that data remains their property at all
times. If a form of ownership is conceded to service suppliers,
buyers must make sure that this is specifically taken into
account in the economic equation, and that the supplier
operates according to the best security and ethical standards
with regard to the sensitivity of the entrusted data.
Supplier dependency: The use of cloud-based services makes
migration processes more complex, because infrastructures
are leveraged by the supplier and not by the client. This
situation demands tighter integration with third parties,
and in the process, reinforces supplier dependency, which
was already great in some domains (such as IT). For buyers,
bargaining power and dynamics are becoming more complex,
levers and arguments are changing, and exposure to price
hikes is greater than in situations where all solutions are
supported by company‑owned and-operated infrastructures.
KEY TAKEAWAYS
•• Digital trends are enabling major transformations
in operating cost structures.
•• There are tremendous opportunities for mature
procurement organizations to cross the next frontier
of performance generation and value creation.
•• This requires engaging closely with internal stakeholders
in business lines, quickly with innovative new vendors,
and strongly with historical suppliers.
9
 All of the digital transformations

02
generate a high value
by-product: data.
Quantity of data rises exponentially,
USE BIG DATA including new forms of data, as well
as granularity and complexity.
AND ANALYTICS
This creates unprecedented
TO MAXIMIZE THE opportunities to pull new insights
PROCUREMENT for procurement and maximize the
impact of optimization levers , but
LEVER also new challenges to be able to
fully leverage it.
10
What type of data?
To extend its mastery of data, above and beyond
its traditional playing field, procurement can
focus on exploring three dimensions:
•• DEEPEN THE FUNDAMENTAL DATA of the
procurement/finance cube. This could
mean, for example, integrating detailed
supplier invoicing into ERP to preserve a fine
level of granularity on the type and quantity
of purchased goods and services, hence
adding new dimensions to spend analysis.
•• EXTRACT AND LEVERAGE COST DATA BY
WORK UNIT/CONSUMPTION UNIT (such as
HR, Finance, Supply Chain, Manufacturing,
Sales, and Marketing). Such an approach
would help break down information silos
and identify real demand/consumption
patterns: cost by employee, cost per square
foot, and cost per process, per distribution
channel, or per customer.
•• ENRICH DATA WITH EXTERNAL SOURCES,
from suppliers (such as integration
of supplier inventory), customers
(identification of cost-generating customer
profiles), or third parties (raw material
prices and supplier certifications).
Why?
Understand consumption patterns.
Big data integration and analysis provide a
degree of visibility and transparency factually
supporting observations only partially
demonstrable in the past. Buyers making
use of them will be in a strong position
at the negotiation table with suppliers
and will be equipped to address internal
demand challenges. Over time, big data
will also shed new light on procurement
strategy development.
An analytical approach to challenge and
track demand was adopted by one of the
largest European banks when it established
a dedicated procurement analytics team
Copyright © 2017 Oliver Wyman
CASE STUDY
RETAIL DISTRIBUTION CASE
Buyers traditionally spend considerable time gathering
the information needed for their negotiations (including
consulting reports and documentation).
The most innovative analytical approaches help automate
the recovery and synthesis of this information, so that
buyers can devote their time to higher-value tasks, such
as procurement strategies and negotiation tactics.
Basic data traditionally used by buyers (historical prices
and volumes) is enriched by analyzing sales data (drawn
from cash register transactions), consumer data (from
loyalty accounts), data on margins, product quality/
non‑quality (returns/after-sale service), and behavioral
data on e-commerce site users. Findings can then be used
to generate powerful fact-based negotiation arguments
for all categories of products and buyers.
This approach may also be further reinforced by adding
richer external data (panelists, competitor prices, and
raw materials prices).
In some cases, automation has even been used
to generate automatic negotiation arguments —
particularly relevant for small and medium suppliers,
to which buyers cannot afford to devote as much time
as to first‑tier suppliers.
in charge of creating a whole series of
consumption metrics based on a cross- TESCO, A
comparison of spend with targeted cost drivers: MULTINATIONAL
number of employees, revenues, number of GROCERY
transactions, and square meters of floor space. AND RETAILER,
These indicators are then measured and
communicated regularly and can be used to
orient remedial measures jointly with business
lines. Procurement thus possesses a factual
KPI base to track and challenge demand, used big
data to cut
which then can provide a means to automate its annual
the production of these KPIs. refrigeration
cooling costs by
20%
Maximize the negotiation lever.
A core historical activity of procurement —
11
Exhibit 5: PROCUREMENT AND BIG DATA: WHERE TO STAKE A POSITION?
INFORMATION SILOS AND DATA TYPES
INTERNAL DATA EXTERNAL DATA
Procurement Finance HR Supply chain Manufacturing R&D Marketing Sales Supplier Customer ...
-
STRUCTURED

1
Granularity
DATA

4
3
2
UNSTRUCTURED

Complexity
DATA

+
1. Traditional procurement information fishnet: structured data from finance ERP and procurement systems
2. Integration of detailed supplier data and basic internal data from other functions
3. Integration of detailed structured internal data from other functions/businesses
4. Integration of customer data and third-party data (market studies, suppliers’ external databases, commodity prices, etc.)
5. Integration of data from unstructured sources: raw text, images, sound, video, etc.
Source: Oliver Wyman

CASE STUDY
MRO
CATEGORY KEY PRINCIPLES OF THE EUROPEAN GDPR
KPI EXAMPLE
•• Extraterritorial application: The regulation will apply to companies established
outside the EU, which process data concerning the activities of EU organizations.
1. Average MRO spend per
production line vs. value •• Explicit and positive consent: Companies and other bodies must give citizens
of production output (%). more control over their private data. This also applies within the framework of
subcontracting relationships.
2. Compliance percentage
•• Right to oblivion: Those concerned have the right to oblige data processing
vs. negotiated contract
managers to delete their personal data at the earliest opportunity.
prices and catalogues.
•• Right to portability: Those concerned have the right to receive personal data
3. Percentage of original provided to data processing managers in a structured format commonly utilized
equipment spare vs. first and legible by machine.
mount brand, vs. 3rd
•• Profiling: Any person has the right not to be subject to a decision founded
party spares.
exclusively on automated processing.
4. Spare parts inventory •• Security by default: Organizations must take into account obligations
level vs. value of output. concerning protection of personal data starting from product design.
5. Value of spare •• Notification in case of leaks: In the event of a serious data breach, companies
parts inventory. and other bodies are required to notify national protection authorities as soon
as possible.
6. Overall Equipment
•• More important sanctions: Regulations give regulators the power to impose
Effectiveness (OEE)
financial sanctions representing up to 4 percent of global company revenues
vs. Maintenance costs.
or €20 million in the event of non-compliance.

12
supplier negotiations — is undergoing new
developments catalyzed by leveraging big
data. Examples abound in retail distribution,
as well as telecommunications.
For procurement, the challenge is considerable:
•• DEVELOP AND MAINTAIN SPECIALIZED
ANALYTICAL CAPABILITIES, possessed by
a small number of individuals, generally
found outside procurement.
•• MOVE FROM THE AGGREGATION OF DATA
REQUIRED MERELY TO LEVERAGE LARGE
MASSES OF DATA, to the development
of advanced machine learning/deep
learning analytical models in order to
uncover insights inaccessible using
standard analyses (relations/correlations),
and also make reliable predictions.
•• REINFORCE THE ABILITY TO INTEGRATE
WITH OTHER COMPANY FUNCTIONS TO
ACCESS DATA, and involve the IT department
in complex data integration projects and in
developing advanced analytical solutions.
•• MANAGE REGULATORY IMPLICATIONS OF
DATA MANAGEMENT, SUCH AS THE EUROPEAN
GDPR (General Data Protection Regulation)
directive, which will come into effect in May
2018 and should help create a harmonized
framework from the multiple national laws
currently in effect.
•• FINALLY, THE HISTORICAL ACTIVITIES
AND PRACTICES OF BUYERS WILL BE
TRANSFORMED. Procurement must once
again act as a true change agent, but this
time focused on itself.
KEY TAKEAWAYS
•• Volume, granularity, and types of data are growing
exponentially inside and outside the company.
•• It can be effectively leveraged to amplify cost
reduction levers through vendor negotiations
and demand management.
•• There are significant challenges : Technical (IT),
skills (data science), organizational (silos), and
regulatory (GDPR).
Copyright © 2017 Oliver Wyman
CASE STUDIES
LARGE INTEGRATED BANK:
MANAGING SUPPLIER RISK
Managing procurement risks is a major objective
of procurement in the banking sector, specifically within
the framework of new central bank directives. The stakes
are twofold: improve visibility on the risk level of all
suppliers and move from static to dynamic management
of procurement risk. For instance, one large banking concern
completes its traditional risk-tracking scorecards (analysis
of financial health, rate of dependency, and corporate
social responsibility (CSR) assessment by EcoVadis) with
an analysis of weak risk signals for its key suppliers. Big data
resources are used to analyze all the information produced
by diverse sources such as the Financial Times, Twitter,
LinkedIn, and specialized networks in the supplier industry.
By leveraging key words, the model identifies weak signals
corresponding to potential risks and thus makes them easier
to anticipate. Proof-of-concept results were conclusive,
and the system is now being implemented across several
procurement categories. Finally, this system can be reversed
and used to anticipate weak signals linked to innovation
(using “positive” key words).
TELECOMMUNICATIONS
CARRIER CASE
In telecommunications, big data initiatives helped a
European procurement consortium (IT, Network, Terminals)
employ advanced negotiation practices.
Granular spend data (category, sub-category) were made
available centrally—whereas they had previously been
scattered and held by each carrier locally—and crossed
with market data to track and measure market share
with the large manufacturers in the consortium member
portfolio, including details on the level of quality/level
of service of each supplier.
Price data obtained at the end of each negotiation were
shared in order to constitute a European benchmark
enabling each member to measure and improve its
negotiating performance rapidly.
Detailed cost structure data on set-top boxes were
aggregated on the European level to develop a configurator
for designing equipment for the best objective cost.
13
 Blockchain is not confined
to financial services. With
the continual waves of
digital transformation and
the exponential rise of data

03
utilization, security and
transparency have become
core concerns for all companies.
Blockchain technology creates
USE BLOCKCHAIN new opportunities that
TO SECURE THE procurement departments should
seize to improve the traceability
SUPPLY CHAIN and the security of product
sourcing and supply chains.
14
 Blockchain structures data in a way
that makes it possible to create and
share a digital journal in which all
forms of transactions are recorded
What is Blockchain?
Although Blockchain technology, which
emerged in 2008, was initially used in
financial services such as BitCoin, it can
now be used to serve procurement as well.
Blockchain structures data in a way that
makes it possible to create and share
a digital journal in which all forms of
transactions are recorded. This technology
relies on cryptography to enable all users
to add new information in a secure manner,
with no need for a “central” authority.
A specific characteristic of this type
of information storage is that data in
the blockchain cannot be altered after
being recorded.
What are the supply-chain
applications?
As a whole, the technology guarantees
both data authenticity and integrity.
Applied to procurement and supply chain,
blockchain can be used to introduce hitherto
unattainable transparency in sourcing
and distribution channels. Currently, such
information will be partial, unverified,
unauthenticated, and most importantly, held
Copyright © 2017 Oliver Wyman
by each of the numerous players in the supply
chain. Data quality thus degrades with every WALMART IS
transaction, and the end user has but a tiny pixel ONE OF IBM’S
of the full picture on the purchased product.
Blockchain can be used not only to track
product origin and manufacturer, but also
all of the components and raw materials that
compose it, as well as all of the intermediaries
who have handled, transformed, and
transported it, thus breaking down the 400
clients
informational silos of traditional supply chains.
currently
Some large corporations have begun to test testing the
this technology in their own supply chain: application
of blockchain
•• IN THE US, WALMART AND IBM ARE technology
WORKING JOINTLY to develop a blockchain on the supply
system to trace pork from producer to chain
consumer. Blockchain technology is used
to inalterably record every step in the
meat’s journey. For the retail distributor,
the ability to collect all this information
(right down to details such as storage
and shipping temperatures) from farmer
to store shelf creates a major competitive
advantage in terms of product quality,
food safety, and consumer confidence.
•• THE MINING GIANT, BHP BILITON, IS
TESTING THIS TECHNOLOGY to track the
movements of rock-drilled shafts and fluid
samples. Blockchain technology allows all
involved parties to share sample location
data in real time, gathered from suppliers
on every continent.
15
Exhibit 6: HOW A BLOCKCHAIN WORKS?

1 A wants to send money to B

The transaction
is represented
online as a
“block”

The block
is broadcast
to every party
2
in the network

3
The block
then can be added

4
to the chain, Those in the network
which provides approve the transaction
an indelible is valid
and transparent
record of transactions

6 The money moves from A to B

$$$
Source: World Economic Forum, Financial Times

16

CASE STUDIES
PROVENANCE
A London-based startup founded in 2013, Provenance
proposes solutions based on blockchain technology
to trace the origin of products (such as food and
manufactured products).
In 2016, a conclusive test was conducted on the Indonesian
tuna supply chain (among the most opaque in the world,
and containing great risks of human slavery practices
among suppliers) integrating blockchain into preexisting
audit systems.
During the pilot phase, fishermen simply sent an SMS
to identify each catch, enabling the identification of the
person who made the catch, the fishing location, and
the characteristics of the catch.
Using an RFID tag or a QR code, this information can
follow the product through every step of the supply chain.
All new information (that is, transformation) is then added
to the blockchain.
Integration into existing auditing systems enables
integration with company data, creating end-to-end
information with no need for complex interfaces among
the different steps of the chain.
BLOCKVERIFY
Founded in 2015 and also based in London, BlockVerify
uses blockchain technology to track counterfeit products
and spot fraud.
In particular, BlockVerify has developed applications for
the pharmaceutical industry, luxury products, diamonds,
and electronics.
Its objective is to identify counterfeit products, products
diverted from their initial destination, stolen merchandise,
and fraudulent transactions.
Each product is labeled with a virtual “BlockVerify”
tag recorded indelibly in the blockchain.
Copyright © 2017 Oliver Wyman
Where does blockchain
technology stand? What
will the impact be on data?
Although blockchain technology has been
proven to work for financial transactions,
which rely solely on the exchange of
information, its use is less advanced for
material transactions. However, maturation
has accelerated since 2016.
IBM, for instance, has established a test
platform for companies to try the service
and assess the advantages to be gained from
blockchain. Blockchain is also available in the
cloud as well as on private servers, specifically
IBM blockchain-certified LinuxONE servers.
IBM also originated the joint initiative with
Walmart, which has moreover announced
the creation of the Food Safety Collaboration
Center in Beijing, and is working jointly with
Tsinghua University to improve the tracking
of food products intended for Chinese
consumers. If Walmart decides to adopt
blockchain to track food supplies on a global
level, this could become the largest-scale
deployment ever observed for this technology.
The collateral impacts on data are also huge,
because blockchain-type databases can
contain much more information than retail
distributors currently possess, the door is
open to the next generation of data analytics.
KEY TAKEAWAYS
•• The blockchain technology is expanding from
the financial services world to the supply chain.
•• It offers an unprecedented opportunity to
secure supply chains and gain end-to-end
transparency of physical flows, and will
support the enhancement of analytics.
•• Technology/Business partnerships with
both startups and major technology players
(e.g. IBM) are essential to succeed.
17
 Above and beyond their impact
on operating models, digital
transformations are affecting
how supplier markets are
structured and how transactions

04
are conducted between buyers
and sellers. The development
of intermediation platforms,
the sharing economy, and
CAPITALIZE ON programmatic media procurement
are three major examples of these
NEW SOURCING new models and the new sourcing
options they generate.
18
Uber-everything
Digital transformations (connectivity,
mobility, and geo-tracking) have accelerated
the emergence of intermediation platforms
between consumers (buyers) and offerings
that were previously fragmented, not
particularly transparent, and variable in
quality. In the mass market, Uber and Airbnb
are clear examples.
These new supply-and-demand aggregation
models now constitute real sourcing
alternatives for procurement in a wide variety
of domains. Uber and Airbnb are now also
offering competitive alternatives to taxis and
hotels for business trips and travel through
their dedicated “for business” offerings.
Such opportunities are proliferating in every
domain. In insurance, a player like Urgent.ly,
which puts insured drivers in contact
with towing companies offering roadside
assistance services, gives users access
to the entire offering and a qualitative
evaluation of all players with just a click.
Users can be connected with suppliers almost
instantaneously, profoundly challenging
historical sourcing models (such as direct
contracts with panels of tow trucks).
In intellectual services, a platform like
Colibee.com puts freelance consultants in
contact with large clients, challenging part
of the business model of some DSC, based
essentially on farming independents out
to work on the client site (agencies).
In logistics, Deliver.ee puts retail distributors
in contact with shipping operators to
ensure last-mile logistics, thus simplifying
subcontractor relations that were hitherto
complex in a fragmented, non-transparent
market of variable quality.
Copyright © 2017 Oliver Wyman
Exhibit 7: AMERICA’S LEADING ON-DEMAND ROADSIDE
ASSISTANCE SERVICE
URGENT.LY
No membership fees
No annual dues
No hidden fees
Source: urgent.ly
For procurement, the question is how to
integrate these new intermediaries, structure
RENTAL
the relationship, gain bargaining power, and
CAR COMPANY
AVIS BUDGET capture the potential benefits of these new
GROUP sourcing opportunities.
ACQUIRED
ZIPCAR
The sharing economy/
Gig economy
Another growing dimension correlated
a car sharing
company, for directly with the emergence of intermediation
platforms is what has been baptized as the
$491 “sharing economy.” As previously mentioned,
million platforms are bringing transparency and
simplicity to networks in industries with highly
fragmented offerings. But these platforms
also enable the available offering to grow and
develop. In situations where professionals
used to address other professionals, now
non-professionals can propose their available
time, capabilities, or assets to the market at
an extremely low marginal cost.
This is true of platforms like Drivy
and BlaBlaCar, for example.
These two examples from everyday life reveal
something about the market: the reason this
new model can compete directly with other
19
Exhibit 8: YARDCLUB.COM
Yardclub FLEET
Increase utilization.
Decrease headaches.
Get an edge on the competition.
Mobilize your job
Manage your equipment at the office,
at the jobsite, or on the go with our
integrated web and mobile platforms
Maximize ROI
Increase utilization of owned and
rented equipment so that every
expenditure is worth the investment
Modernize management
Upgrade your whiteboard,
and let modern asset management
technology make work easier
Source: Yardclub.com
types of services at an extremely competitive
cost is that its underlying economic rationale
is completely different.
Examples abound in the B2B world, with
startups like YardClub.com, which allows
construction companies to rent construction
equipment from other companies in the
industry. Conversely, this system helps
maximize the utilization of assets and
reduce TCO.
Also of note is recently founded
Bird-Office.com, an extremely flexible,
dematerialized platform offering office space
and conference rooms for rent from other
companies, and by the same token, allowing
these companies to rationalize real estate costs
by renting out unused space in their facilities.
Finally, another very recent startup,
Mobiliwork.com, has developed an even more
disruptive platform: the site helps companies
20
lend employees to other companies within
a secure legal framework and thus adapt
personnel costs to business fluctuations,
while allowing employees to develop
their capabilities.
For procurement, these new economic
models herald the emergence of new sources,
new types of partners, and new ways to
obtain services. Conversely, such platforms,
which represent the potential suppliers of
tomorrow, could also enable companies
to monetize underutilized or idle assets,
generating complementary revenue. It’s up
to procurement to shed light on all of these
potential applications.
Programmatic buying
65%
of B2B marketers
When it comes to procurement media
currently buy or space, digital transformations have driven
sell advertising the advent of programmatic buying. These
programmatically, veritable online exchanges have transformed
as compared to a previously long, unresponsive, and complex
54% in 2016 procurement process into an almost instant
transaction based on the analysis of a complex
combination of data, machine-learning
algorithms, and practically instantaneous
contacts between buyers and sellers.
The most effective approaches allow for
quasi-individual recognition of consumers,
regardless of the communication channel
and contact model (such as website, mobile
app, Facebook, and email) to ensure that each
interaction generates data for the next one.
For procurement, integrating new technologies
and new practices of this type disrupts
capability models (what data to integrate, how
to configure algorithms, and how to negotiate),
prescriber relationship models (impact of cost
algorithm specifications, how to integrate
this type of procurement into traditional TV/
Radio advertising, and acceptance to rely on
automated decision making), and supplier
relations (intermediation).
E-commerce B2B: the
“low value spot buy” revolution
In 2015, Amazon launched Amazon Business,
an online marketplace dedicated to
companies, offering a catalogue of products
specifically adapted to B2B needs, estimated
at several hundred million SKUs.
The potential benefits of this new offering are
tremendous and may literally transform how
procurement manages (or fails to manage)
its class C procurement.
These benefits exist both for large companies
that have already deployed industrialized
e-procurement systems/outsourced “low
value spot buy” type procurement, and
for midsized companies with difficulties
managing this type of procurement.
For large corporations, an approach such
as Amazon Business can be used to create a
fully integrated platform to manage both the
act of procurement (negotiation/contract)
and the supply. Buyers thus save the time and
resources required to outsource/industrialize
sourcing, as with e-commerce systems, and
specifically all that is required to manage
corresponding catalogs.
Copyright © 2017 Oliver Wyman
The benefit is even greater for midsized
clients, who have fewer resources and whose
procurement organizations are typically
less developed.
Features that can generate the greatest
benefits include:
1. Liberate time previously devoted by buyers/
non-buyers/procurement specialists to find
products/suppliers and negotiate prices.
2. Consolidate supplier panels to benefit from
volume discounts.
3. Integrate contractually-negotiated prices.
4. Integrate means of payment such as
procurement cards.
5. Manage user profiles and complex
approval workflows.
6. Track and measure demand with
embedded analytics.
7. Benefit from free delivery tracking
and 48-hour delivery.
8. Benefit from complete product information.
Moreover, it is possible to integrate Amazon
Business into Coupa/Ariba procurement
models at companies that are already equipped.
KEY TAKEAWAYS
•• New economic models have disrupted traditional business models
and create new sourcing opportunities for all types of goods
and services purchased.
•• Digitally enabled intermediation platforms (uber-like) have created
unprecedented access to supplier markets that were particularly
fragmented and opaque.
•• Large e-commerce players such as Amazon are entering in the space
of B2B bringing tremendous tail end spend rationalization.
21
 Digital transformations
also apply to procurement
processes. The idea is to
dematerialize all source-to‑pay
activities and processes, and
all resulting interfaces with
in-house stakeholders and
suppliers. The potential gains

05
in efficiency are massive and
would liberate resources to
be reallocated to higher‑value
tasks. The digitization of
DIGITIZE procurement processes also
enables the generation of new
PROCUREMENT data, which can be used in
PROCESSES AND turn to perform more detailed
analyses of procurement
COLLABORATION practices, consumption models,
and supplier transactions.
22
Exhibit 9: SOURCE-TO-PAY PROCESS AND ACTIVITIES
CATEGORY SOURCE PROCURE PERFORMANCE
MANAGEMENT TO CONTRACT TO PAY MANAGEMENT

Category Roadmap “Day-to-day” Negotiation Procure Performance

strategy event RFX and Contracting
to pay management
Supply base management planning decision

Spend
analysis Contract e-procurement
Definition and making catalogs Supplier
Reversed
formalization of performance
Business requirements auctions
specifications management
analysis and TCO modeling
Purchase
Roadmap Contract request and
Supply base and action
management signature purchase
tracking order
Suppliers
offer analysis
Tender Financial
Benchmarking (allocation
management Goods performance
scenarios,
(RFI/RFP) Contract receipt and management
“what if”
analysis,…) database accounts
payable

Supplier relationship management

Buyer/Stakeholder collaboration

Traditionally digitized in ERP programs offering basic features

Digitized through specific modules/applications
Little digitization to date. High efficiency and effectiveness potential
Source: Oliver Wyman

What activities are concerned? contact inside and outside the organization,
in order to work on prescriptive optimization
What is the target objective? levers and maximize the level of control over
With this in mind, digitization of procurement consumption (volume driver) by ensuring the
processes and tasks must aim for a reliability of transactional systems.
twofold objective:

Efficiency: Optimize the time spent on each State-of-the-art and

task, specifically in a context of growing
pressure on procurement costs and personnel,
to ensure the attainment of the best possible
result at the lowest possible cost, and to
focus the efforts of buyers, whose time is an
expensive resource, on higher-value tasks.
Effectiveness: Maximize the impact of data
analysis tasks by improving their precision
and exhaustiveness; maximize the impact
of collaboration by multiplying points of
new technologies
When it comes to IT deployment and
allocated resources, procurement has long
been a “poor cousin” compared to finance,
sales, supply chain, and manufacturing,
which is fairly paradoxical given the stakes
involved. There are many reasons for this:
procurement objectives are less well covered
by transactional IT systems (such as SAP)

Copyright © 2017 Oliver Wyman 23

Exhibit 10: P2P SOFTWARE ADOPTION RATE (US)
PER REVENUE SEGMENT

16%

4%

Small-Medium
Enterprise
15%

65%

and procurement matured later than other

functions. Only the transactional activities
32% of procurement have traditionally been
27%
covered by ERP projects.
Lower
Middle Market We have thus gradually seen the development
8%
of specialized application suites and modules
33% focused on procurement tasks. This was true,
for instance, for Ariba, Emptoris, Zycus, and
Bravosolutions, to name just a few.

Meeting a real need, these kinds of offerings

24% have proliferated, albeit with a few limitations:
26%
Upper •• IT INVESTMENTS BY PROCUREMENT
Middle Market REMAIN LIMITED: Very often, the prize has
11% gone to a few modules (spend analysis,
39% RFX, and e-procurement), but rarely to
complete suites covering all activities.
•• THE LEVEL OF ADOPTION WITHIN THE
COMPANY REMAINS VARIABLE, notably
4% due to difficult changes in management and
the debatable ergonomics of the proposed
tools versus traditional buyer tools.
28%
Enterprise •• TECHNICALLY SPEAKING, DEPLOYMENT
32%
REMAINS EXPENSIVE AND COMPLEX,
specifically when it comes to integration
with the existing information ecosystem,
36%
and the results are sometimes
disappointing (degraded information,
features that don’t really work).
AP automation
Holistic P2P automation •• IN THE END, FEW MARKET PLAYERS HAVE
Procurement automation
None MANAGED TO BUILD REAL CREDIBILITY,
thus limiting the choices of procurement,
Source: Paystream Advisors Q4 2016
as well as sector competitiveness.

24

However, the end of the 2000s saw
a new generation of players taking
position in the solutions landscape (such
as Coupa and Salesforce), specifically
by meeting the big challenges posed by
the old‑generation systems: functional
end‑to‑end coverage, sophisticated
ergonomics (mobile applications, web
interfaces, and intuitiveness), and
simplified deployment (cloud solutions).
So what do we do now?
And how?
Increased pressure on procurement to
produce results, combined with cost and
workforce constraints, make it more critical
than ever to adopt tools and systems,
which alone can cut through efficiency
and effectiveness boundaries.
The following priorities must be addressed:
•• ANALYTICS: As we have seen previously, not
only do analytics represent a major portion
of the time devoted by procurement
professionals, but also determine the
quality and results of procurement
strategies, negotiations and consumption
management. Above and beyond solutions,
the point is to mobilize the data of an
entire organization by breaking down
informational silos.
Copyright © 2017 Oliver Wyman
Find a way to deploy systems
with ergonomics comparable
to what buyers experience in
their personal lives
•• NEXT-GENERATION E-PROCUREMENT:
This critical system building block makes
sure that companies capitalize fully on the
savings generated in upstream phases,
specifically with the algorithms found in the
very latest solutions, which can be used to
orient consumption behaviors. Users are
henceforth completely familiar with such
systems, which have now become part of
everyday life for their private procurement
activities (Amazon and other e-commerce
sites). A key objective is hence to find a
way to deploy systems with ergonomics
comparable to what buyers experience in
their personal lives, and maximize adoption
with mobile applications on tablets
and smartphones.
•• PAPERLESS: Although it may seem obvious
in 2017, few companies have managed
to achieve a 100 percent paperless
organization, although companies that
have gone down this path have made
significant progress and inroads. The
paperless organization is a big change,
but the positive implications are numerous.
Fully dematerialized processes, with a
particular focus on contracts (including
electronic signature) and supplier
invoicing, are a main objective in terms of
organization. In this regard, one major lever
is the creation of ecosystems, supported by
API technologies.
•• VIRTUAL COLLABORATION: Video
conferencing by PC/mobile/tablet,
screen sharing, and synchronized online
collaboration with unique documents are
25
Exhibit 11: LANDSCAPE OF LEADING PROCUREMENT SOLUTIONS PROVIDERS
PROFICIENCY (SOLUTION FUNCTIONALITY AND INNOVATIVE FOCUS)
9.5

Coupa
9.0
Puridiom1
GEP
8.5
Determine Sciquest
Ivalua
Basware
8.0 Zycus
Ariba3
Wax Digital
7.5
Birchstreet Tradeshift
Verian2
7.0
Xeeva Buyerquest
6.5
Esker

6.0
5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5
ADAPTABILITY (PROVIDER EXPERIENCE AND RESOURCES)

1* Puridom was acquired by BravoSolution during our review

2* Verian was acquired by Basware during our review
3* Ariba did not provide updated info. Plane positioning is based on publicly available sources
Source: Paystream Advisors Q4 2016

Exhibit 12: PANORAMA OF MOST INFLUENTIAL PROCUREMENT STARTUPS

TRADESHIFT KINNEK TAMR SIRION LABS PROCURIFY SCOUT CONNXUS CONTRAQER
Business Cloud based B2B platform Platform that Supplier Cloud-based Cloud-based Online service SaaS
description platform businesses combines ML management procurement sourcing that connects procurement
that helps that simplifies and data platform, management platform that businesses with management
companies discovering, science with covering solution automates companies system that
to improve transacting, collective contract, that enables the enterprise seeking to automates the
invoicing, communicating, human insight performance, enterprises to buying process expand and procurement
workflow and interacting relationship, manage their for buyers and diversify their process from
and supplier with suppliers; Provides risk, and procurement suppliers supplier base RFQ generation
financing for small advanced consumption spending to delivery
processes businesses procurement management
analytics
Founded 2009 2011 2012 2012 2011 2012 2010 2012
year
Total $182 M $46 M $41.2 M $16.8 M $12.7 M $11.75 M $10.75 M $4 M
funding1
Last round 2017 2015 2016 2016 2016 2016 2016 2016
Investors VC, Tech VC, Business VC, Tech VC, Business VC, Business VC, Business VC, Business VC, Business
companies Angels company, Angels Angels Angels Angels Angels
Business Angels
Category Marketplace, Sourcing Analytics Supplier Spend Sourcing Sourcing Sourcing
sourcing management management
Location San Francisco, New York, Boston, California, Vancouver, San Francisco, Ohio, Virginia,
USA USA USA USA Canada USA USA USA

1* Total equity funding + debt financing

Source: CrunchBase, Capital IQ, Oliver Wyman analysis

26
Technological advances, combined with the
explosion of mobility, data, and cloud solutions,
make these approaches more relevant than ever
practices that can be institutionalized at
low cost and implemented rapidly with
tangible benefits.
•• REVERSE CRM: Sharing/Uploading of
information collected on suppliers by all
points of contact, whether in procurement
or in the business lines, for SRM purposes,
or to support supplier innovation capabilities.
There are three potential approaches
to achieve this:
•• INSTALL INTEGRATED/PACKAGED
SOLUTIONS BY THE MOST INNOVATIVE
SOFTWARE PUBLISHERS on the market,
with a minimum of customization and
integration. This was the choice made, for
example, by an European leader in specialty
chemicals, which implemented Salesfore
for all procurement tasks.
•• DEVELOP CUSTOMIZED BEST-OF-BREED
SOLUTIONS, using a basic software
publisher solution which is then massively
customized. This may be a good idea, for
instance, when some processes are already
optimized and implementing a standard
solution would degrade performance.
A major integrated bank decided to
go this route, specifically for buying
intellectual IT services.
•• ALLIANCE WITH INNOVATIVE STARTUPS:
Develop mobile front ends focused on
creating a consistent user experience,
regardless of the functional building blocks
used at the back end, to ensure maximal
adoption and best-in-class ergonomics,
accelerating processes and collaboration.
We are now witnessing the emergence of
a significant number of startups beginning
Copyright © 2017 Oliver Wyman
to target procurement activities, principally
sourcing, but also analytics and transactional
The use of
buying in the form of marketplaces.
e-procurement
can double
the number Technological advances, combined with
of purchase the explosion of mobility, data, and cloud
orders solutions, make these approaches more
processed per relevant than ever, as they address the two
procurement
great remaining challenges: complexity
FTE
of integration and the user experience.
We can expect the industry to move toward
consolidation in the coming years in favor
of a few dominant solutions, as well as move
toward adjacent markets. Such was the case
with Tradeshift (adopted by Air France),
a firm initially positioned on downstream
procurement processes, but which gradually
moved up the chain to sourcing tasks and
supplier relationship management.
KEY TAKEAWAYS
•• Digitization of procurement processes and
collaboration has been a long standing story,
however with slow ramp-up of adoption overall.
•• Technical integration of solutions and user
adoption were the two major historical
pain points, especially for incumbent
solution providers.
•• Most recently, next generation vendors
(e.g. COUPA) or innovative start-ups have
successfully addressed these challenges by
providing instant “as a service” solutions with
a compelling user experience.
•• Procurement leaders must integrate next
generation solutions to successfully drive
process efficiency and increased compliance,
demand management, and analytics.
27
 The advent of robotics and
artificial intelligence presents
major opportunities to process

06
both complex and repetitive
transactional tasks in a more
efficient and cost-effective
manner. The media is filled with
ROBOTIZE examples of the dawn of these
disruptive technologies, and
SOURCING TASKS a growing share of jobs will soon
be affected by robotization.
28
 Exhibit 13: BENEFITS OF RPA

COST SAVINGS IMPROVED

• Replaces high-cost human PRODUCTIVITY
labor by low-cost robots AND QUALITY
(up to 60–80% cost savings) • Guarantees 24/7
• Frees employees’ time for availability of
complex and higher service and faster
value-added activities processing (up to
50% increase in
In a recent survey, 100 shared services productivity)
managers predicted their firms would adopt • Ensures processes
are 100% regulatory
RPA (robotics process automation) as early compliant
as 2018. Only 27 percent of the managers
interviewed currently make use of these
technologies, though 67 percent reported
plans for implementation within 12 months,
while 35 percent were actively looking into it
and 38 percent were interested. Finally, and
most importantly, 45 percent of managers
whose firms have already employed RPA
reported reduced costs.

The next generation of robots, expected OPTIMIZED

ANALYTICS
to arrive in the next three to five years, • Gives a complete mapping
will take process automation to the next and detailed documentation
of processes
level. The transformation to “cognitive
• Provides insights through
automation”, as it is known, is being catalyzed high quality data gathering,
organization, and analytics
by developments in artificial intelligence
combined with available big data.

Concerning purchasing function activities, FASTER ROI

RPA will enable the following: • Simple process

automation can
have ROIs of less
•• INDUSTRIALIZED DATA ANALYSIS: than three months
Understanding consumption prescription • Effects of scale
patterns; producing analyses; classifying applicable from
day 1 after launch
expenditures and benchmarks; and
preparing vendor negotiations.
•• SUPPORTED DECISION MAKING:
Proposing alternatives to expressed user
NON-INVASIVE EASY TO IMPLEMENT
needs; managing inventory and supplies;
• Reduced investment • Typical
performing supplier evaluations; tracking requirement due to implementation time
and measuring purchasing risks; and direct integration to for simple processes
existing infrastructure is measured in weeks
identifying new markets.
• No invasive actions • Rapid prototypic
•• AUTOMATED REPETITIVE TASKS REQUIRING to underlying systems technique applicable
COGNITION: Preparing contracts; tracking
and collecting rebate information using
Source: Redwood Software, Spendmatters.com. 2016
invoice analysis; and conducting RFI/RFPs.

Copyright © 2017 Oliver Wyman 29

Exhibit 14: ROBOTICS PROCESS AUTOMATION TYPES AND APPLICATIONS

Simple, repetitive tasks Complex, multi-system

Task Bots Meta Bots IQ Bots Artificial Intelligence (AI)

Description • Replicate complex • Leverage API-level • Learn and adapt over time • Combines smart data
process actions integrations to create and smart algorithms
system-to-system • Become independent
• Perform actions taken but with fewer errors • Decision making based
by humans at automations
on machine learning
presentation layer of • Share automations • Leverage and synthesis of
any desktop-based with Task bots unstructured data large datasets
application • Capable of making
• When combined with
• Capable of executing Task bots, Meta bots decisions based on
multi-step processes are ideal for multi-skill accumulated learning
processes and experience

Best for • Repetitive, rules-based • Complex, scalable • Managing through • Language interaction,
tasks relying on processes fuzzy rules and processing and dealing
structured data processing with high amounts
unstructured data of unstructured data

Examples • New supplier • Contracts execution • PO generation • Fraud investigations

registration
• Change of points
of contacts
• Inventory
• Structured storage
of documentation
Source: Oliver Wyman
follow-up • Payments screening
• Flaws detections • Customer charge-backs
• Basic reporting
• Demand forecast
generation generation
• Auctions
• Customer complaints
• Advanced financial
risk management of
ongoing contracts

What are the benefits and Processes consuming substantial resources

challenges for procurement
organizations?
In the short term, RPA could be useful as
a retrofit solution for legacy processes or
processes that have been inadequately
digitized. It could easily and cost-effectively
automate tasks previously performed by
human labor through screen scraping,
web scraping, and report mining.
Surprisingly, to generate savings on a
meaningful scale, companies will want
to robotize their small-scale processes.
have already been automated to a great
degree, and the savings impact of further
automation would be only marginal.
Therein lies the challenge. Taskbots used
to retrofit legacy processes would require
substantial configuration, adaptation, and
maintenance, given that they operate on
the front-end. They are extremely sensitive
to changes in front-end layouts and in
interactions with other applications. This
is particularly true in the context of the wide
number of small processes that might be
equipped with RPA.

30
Exhibit 15: RPA ADOPTION IN PURCHASE-TO-PAY

77%None

16%
7%
Partially rolled out
Piloting

0%
Fully adopted

Source: Hackett, 2016

Savings generated should therefore be
progressively reinvested in structural
digitization and process automation, with the
long view in sight. The end goal here ought
to be developing fully digital processes.
In addition, the experiences of companies that
have made use of RPA featured challenges
specifically related to organizational change:
resistance from employees; concerns about
compliance and security; overly complex
technology rollouts; mismatches with vendors,
even with the technology itself; managing
squeamish stakeholders; and a general lack
of vision and strategy.
Work will move, both in terms of roles
and geographical location. Purchasing
professionals regularly spend a major share
of their time on repetitive low value-added
tasks. The use of robots could free up
considerable time that can be reallocated
to more value-added tasks. Here the relevant
questions are: Will companies’ available
capabilities support this reallocation
of professionals towards more complex
and higher-value work? What will be
the resulting impact on labor relations?

In the medium term, understanding

technologies, solutions suppliers, and
economic models is critical. What are the
Taskbots used to retrofit
relevant technologies? Should companies legacy processes would
develop proprietary solutions or acquire them
off-the-shelf? Who are the best potential require substantial
partners? What is the best business model: configuration, adaptation,
on-demand robotics with payment per
transaction, per project, or per managed euro? and maintenance, given
How can data sensitivity be respected? How
can companies limit their dependency on the
that they operate on
publishers of technologies and solutions? the front-end
Copyright © 2017 Oliver Wyman 31
In the medium term (five years out),
when artificial-intelligence technologies
and machine-learning algorithms
reach greater maturity, the talent
management and organizational
implications will be more significant
Geographically, the opportunities presented
by role relocation are immense. Moving
from a labor cost-based model (full-time
employees) to a CAPEX cost-based model
(robots) profoundly redefines all current
on-shoring and offshoring practices.
A considerable proportion of global business
service organizations, which have used
resource location as a savings lever, will
have to reconsider their settlement patterns.
Supplier relations will be turned upside
down. Who, for instance, would negotiate
with a robot buyer? Likewise, would there
be robot-sellers? The same concerns hold
inside companies, where the reactions
of prescribers and users to robot buyers
may be mixed.
Novel capabilities will be needed.
To implement and maintain robot-buyers,
purchasing organizations will have to
combine the best talent in the digital
fields (such as data scientists, designers,
and developers), process optimization,
and category management, in order
to manage technical teams.
32
What has been concretely
AMAZON accomplished at this stage?
HAS INCREASED
ITS BOTFORCE
What should procurement
BY FOURFOLD leaders do?
OVER THE PAST
TWO YEARS Despite the great media hype and the
attractive business opportunities it
presents, robot deployment remains
highly experimental at this stage.
In the short term, the benefits will be
1 out of productivity gains from automating
every 7 processes that are repetitive but still require
employees is a great number of manual tasks. This will
now a robot
allow resources to be reallocated to
higher-value activities.
Thus, sourcing robotization must be aligned
with the trajectory already charted by
purchasing organizations, focusing resources
and capabilities to place purchasing in
an advisory position to business lines.
In the medium term (five years out),
when artificial-intelligence technologies
and machine-learning algorithms reach
greater maturity, the talent management
and organizational implications will
be more significant, and pose serious
questions concerning the expertise
needed to capitalize fully on human-
robot collaborations.

Procurement leaders must work along
the following lines to define an approach
that ensures timely, smooth, and effective
deployment of RPA technologies:
•• GOALS: What can be achieved
through robotics?
•• POLICIES AND STANDARDS: What should
robots be allowed to do, and not do?
•• PROCESSES: What processes are appropriate
for robotization? What processes are better
candidates for outsourcing (via APIs)
or end-to-end digitization.
•• ROLES AND RESPONSIBILITIES: Who will
be accountable for outcomes achieved
through robotization? How will assessing
accountability be different from the current
business process owner role?
•• DATA AND TECHNOLOGY: How can
deployment mode, data, and technology
be reconfigured to accommodate
robotization on a large scale?
•• RISK AND QUALITY CONTROL: What
controls/security are needed to monitor
and provide oversight over robots and
robotic processes, and how will failures
be handled?
•• GOVERNANCE: What governance
mechanisms are necessary to
monitor investments in robotics?
Copyright © 2017 Oliver Wyman
CASE STUDY
THE VODAFONE
PROCUREMENT COMPANY
The Vodafone Procurement Company centrally manages
around €20 billion of spend every year for Vodafone
businesses and partners in more than 26 countries.
Its 300–plus category managers will soon be using
cognitive computing to support virtually every aspect of
the procurement and supply chain management process.
The aim is to create the “category managers of the future,”
to turbo-charge decision making and to open up new business
opportunities through the practice of “self-disruption.”
The experimental deployment of two robots, for example,
has helped Vodafone speed up the request-for-quote
process. Vodafone’s CPO says: “You would send in
quotations to us, then we [would] seek a formal quotation;
it’s quite a manual process with people typing in things
and converting free text orders. So we worked with
software robotics guys to build a robot that could process
these. That task used to take 20-plus minutes to do, and of
course a team member’s time. It now takes just six minutes
and it’s always correct.”
The company used technologies from SirionLabs and
Docusign to automate, smooth, and accelerate every stage
of the procurement workflow. These tools do not just make
processes faster, easier, and more visible, they also free
up staff to focus on building relationships and delivering
strategic goals, rather than chasing paperwork.
To support its journey, Vodafone created a new dedicated
team tasked with driving the transformation towards a
digitally driven procurement organization called Cognitive
Procurement & Digital Sourcing.
KEY TAKEAWAYS
•• Robotics Process Automation is a promising emergent
technology, but use cases in procurement are still extremely
limited, and still in the experimental stage.
•• In the short term, RPA can provide cost benefits and
efficiencies as retrofitted solutions on legacy processes
and inadequately digitized processes, and be reinvested
in proper process redesign, automation, and digitization.
•• In the long term, this will enable a large reshuffling
of human resources.
•• Procurement organizations should adopt a clear framework
when looking into RPA opportunities.
33
 07 The challenge is on: digital
transformations are yielding
tremendous performance
DESIGN A DIGITAL opportunities. Procurement
organizations must begin their
PROCUREMENT journey without delay. From
TRANSFORMATION culture to IT systems, through
to governance and supplier
PLAN relationships, the time to
act is now.
34
A holistic approach
to transformation
To capitalize fully on current and future digital
transformations, the entire procurement system
must be changed. Six key dimensions must be
accounted for when defining target models:
Develop a digital vision and culture
in procurement: A digital culture must
permeate the entire organization before it
can be integrated into procurement activities,
including procurement strategy development,
redefinition of needs with prescribers, and
negotiations. That means the digital culture
must concern every player, every day, and then
find its natural applications in procurement
strategy. Procurement leaders and managers
must promote digital awareness, and line
managers must adopt new prisms as they
perform their day-to-day tasks in order to
manage new constraints and implications.
Articulate the actions of the CPO/CDO/
CIO triangle: To be fully aligned with the
company’s digital strategy over time, the
procurement director must articulate his
transformation plan with the CDO and CIO.
This requires establishing and/or evolving
procurement governance mechanisms
(category committees, zone committees,
procurement management committees),
which must henceforth integrate digital and IT
representatives to ensure optimal detection of
upstream opportunities, consistent technology
choices, and full alignment with business lines.
Develop new capabilities: Developing
advanced analytical approaches, managing
change at the core of business lines and
relations with pure digital suppliers, rethinking
traditional negotiation and contract-related
capabilities, mastering new business models,
grasping supplier market shifts: the capabilities
Copyright © 2017 Oliver Wyman
demanded by the new digital age are far
beyond the traditional understanding of
procurement. The buyer of 2020 will be very
different from the buyer of today. Ambitious
84%
of procurement
training plans will therefore be necessary to organizations
support current employees, and targeted believe that digital
external recruiting will be necessary to meet transformation
the growing need for experts in the new will fundamentally
change the way
profession of “data scientist.”
their services are
delivered over
Rethink supplier relationship the next three
management: Historical suppliers must to five years
be systematically and almost constantly
challenged on their ability to integrate
digital innovations that can improve their
competitiveness and offer new outlets for
performance. The supplier relationship
must also be adapted to integrate pure
digital players by adopting simple, flexible,
and agile processes. Assisting developing
startups through joint innovation,
co-financing, and experimentation must
also be taken on – otherwise companies
risk watching innovators leave them for
the competition.
Bring in big data: Big data must be leveraged
with dedicated tools to anticipate risks,
by detecting weak signals and supporting
suppliers proactively in risk migration plans.
Design and implement a systems and data
integration roadmap: The IT blueprint for
procurement must be clearly defined with
the CIO and investments prioritized to ensure
that procurement does not remain the “poor
cousin” of digital tools and systems. The
director of procurement also needs to identify
key integrators and technological partners
and bring them into designing the blueprint.
Finally, intensive change management must
be conducted with procurement players
and stakeholders in other functions and/or
business lines.
35
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Open Innovation is becoming
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Oliver Wyman is a global leader in management consulting that combines deep industry knowledge with specialized expertise in strategy,
operations, risk management, and organization transformation.
Oliver Wyman’s global Operations Practice specializes in end-to-end operations transformation capabilities to address costs, risks,
efficiency, and effectiveness. Our global team offers a comprehensive and expert set of functional capabilities and high-impact solutions
to address the key issues faced by Chief Operating Officers and Chief Procurement Officers across industries.

AUTHORS

Xavier Nouguès, Head of Value Sourcing

Thierry Mennesson, Partner (Digital, Technology and Analytics practice)
Steve Scemama, Partner (Digital, Technology and Analytics practice)
Denis di Vito, Engagement Manager (Operations practice)

CONTACTS

Lars Stolz Brian Prentice

Global Head of Operations Head of Manufacturing and Process Operations
lars.stolz@oliverwyman.com brian.prentice@oliverwyman.com
Greg Kochersperger Alex Lyall
Europe, Middle East, and Asia Head of Operations Head of Digital Operations
gregory.kochersperger@oliverwyman.com alex.lyall@oliverwyman.com
John Seeliger
Americas Head of Operations
john.seeliger@oliverwyman.com DESIGN

Xavier Nouguès Luis Hurtado de Mendoza

Head of Value Sourcing Designer
xavier.nougues@oliverwyman.com luis.hurtadodemendoza@oliverwyman.com
Michael Lierow Vladica Stanojevic
Head of Supply Chain Designer
michael.lierow@oliverwyman.com vladica.stanojevic@oliverwyman.com

www.oliverwyman.com

Copyright © 2017 Oliver Wyman

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